Good morning and welcome to the Noble Capital Markets Virtual Equity Conference. I'm Joe Gomes, Managing Director and Senior Analyst at Noble Capital. Today, I have the pleasure of introducing CRA International Inc, also known as Charles River Associates. Following the presentation, we will have some time for Q&A. With us today from CRA is Paul Maleh, President and Chief Executive Officer. The floor is yours, Paul.
Thank you, Joe, and good morning, everyone. As Joe said, my name is Paul Maleh. I'm President, CEO, and Chairman of the Board at Charles River Associates. I've been at this firm for 37 years. In addition to my current titles, I think I've practically held every single title at the organization. I care very deeply about CRA, and I'm very proud of our accomplishments. In about 14 minutes or less, hopefully you can share a little bit of the excitement on these accomplishments. Okay. CRA intends to be the trusted partner for clients as they turn for clarity in their most complex and consequential decisions, and a community where people grow, lead, and pursue work that demands their best.
We are a multinational organization, 20 offices across eight countries. Our services span two major lines. Legal and regulatory services captures about 80% of our revenue, and management consulting services, the remaining 20% of our revenue. We recruit the best and brightest, and work really hard to provide them an environment in which to flourish. I'm proud of so many of the accomplishments, but the statistic to the far right is probably one that captures greatest part of my joy.
The statistic reads, "Less than 5% voluntary turnover among CRA's top revenue generators over the past five years." Every year, I present to the Board our top 30 revenue generators. We talk about their geographies, their practice makeup, their compensation. If I look at over a five-year period of time, the union of that top 30 is about 60 of my colleagues. People go in and out of the top 30 list, as you could imagine.
This statistic is not 5% per annum. This means over a five-year period of time, less than three of our top revenue generators have decided to pursue other employment opportunities. The reason I find this to be one of the most striking and impressive statistic is these individuals can go anywhere they want, and capture very attractive compensation packages.
But they are electing to stay at CRA because of the quality of our clients, the quality of our services provide them the best opportunity to flourish. This is a list of our practices. All are highly regarded. Life sciences, energy, and Marakon make up the management consulting component of the 20% of our revenue. All the rest make up the legal and regulatory services. Our antitrust and competition economics practice makes up roughly 45% of our total revenue at CRA.
The big three, as we sometimes refer to them, antitrust and competition economics, forensic services, and life sciences comprises roughly 25%, ah 75%, am sorry— 75% of our total revenue. Many of you on this call may not be familiar with Charles River Associates, but I am pretty sure you are familiar with our clients. Here is a bunch of logos. In the past two years, we have worked with 88 of the Fortune 100 companies. If I showed you this same chart two years ago, five years ago, it would have very similar statistics, 87, 88 of the Fortune 100 companies.
The reason this chart is so impressive is that we are not a subscription-based consultancy. We do not have any annuity contracts. That means these clients are coming to CRA time and time again for their most complex and consequential decisions. On the legal regulatory side, law firms act as the intermediary, retaining CRA on behalf of these large multinational organizations. Again, the statistic is quite gaudy. 98 of the top 100 law firms come to CRA for their most pressing legal matters. Again, two years, five years back, you see the impressive statistics.
We clearly have a very strong, established brand in the marketplace, and we are working hard to continue to add depth to the services and to the relationships that we have. Outstanding people, outstanding services, and premier clients yields, surprise, impressive financial results. CRA for the last 10, 15 years has grown top line in the 8%, 9%, 10% per annum range. Our profit margins have grown at a faster rate than revenue, which means we have found ways to expand our profit margins as we continue on our journey.
Here it shows for the first two quarters of 2026, we have grown revenue 12% on that. In fiscal 2025, grown revenue 9%, and over the previous five years, 48%. Again, right around that 9%, 10% per annum. Not only have we grown, we have grown with funds 100% provided by operations. What is impressive about that statistic is we are able to grow at these impressive rates year in and year out, while still returning substantive capital back to our shareholders. Our aim is to return at least 50% of our adjusted cash flows from operations to our shareholders.
About 3/4 of that redistribution comes in the form of stock repurchases, with the remaining 1/4 being on cash dividends. As the last line of this chart shows, we have a pretty attractive return on our stock repurchases. The past five years, we have repurchased $184 million of our shares. Average price of those repurchases, $110. Last I checked, we are trading somewhere in the $160, $170 range. Okay. Our investment thesis is really quite simple. That is to maximize CRA's long-term value per share. We are value-based decision makers at CRA.
We will invest in value-creating growth, and we will return our excess capital back to our shareholders. That is what we have done historically, and the market and the position of our services give us confidence that we can continue to provide these kind of returns to our shareholders. Given the time constraints, I am only going to highlight a couple of these key points. CRA sees AI and the impact AI is having on our sector and our clients as a demand amplifier and a productivity enhancer. We believe that it strengthens the position of firms like CRA.
I think in the AI world, expertise has great value, and CRA is a company full of experts with deep functional credibility. Quickly here on our financials, the profit margin, even as reported by GAAP, is very impressive. I want to note here, there is a large non-cash item that is flowing through our income statement that is not captured by our profit margins, whether it is on gross profit, EBIT, EBITDA, profit before tax, or EPS, and that is the non-cash amortization of forgivable loans. We grow in one of two ways at CRA. We grow organically, and we grow inorganically.
If I look at medium to long-term, our growth has been roughly 65% organic and 35% inorganic. The forgivable loans are the main tool we use for purchase price consideration for inorganic pursuits. When you acquire a brick-and-mortar entity, the accounting rules are really quite simple. The cash outlay goes out on day one to the acquired entity, and we get the benefit of the incremental revenue and profits on our income statement, and that cash price largely resides on our balance sheet.
When you are recruiting individuals or recruiting groups of individuals from competitors here, we do not have the luxury of using standard acquisition accounting. The purchase price stays the same based on the economics of the prospective acquisition, but the accounting is quite different. That accounting flows through these non-cash charges. I am not saying that the purchase price is not a true cash outlay for CRA. If you do not make the adjustment of these non-cash charges, which are not captured in the D&A of EBITDA, you will be double-counting the impact of our inorganic pursuits with it.
As one example of the reason you have to make these kind of adjustments, if you look at the ratio of CRA's adjusted net cash flows from operations to our EBITDA, it is right around 112%. It was 112% in 2025, 111% the last three years, 112% the last five years, and the ratio is largely consistent as you go back in time. So we are converting about $1.12 for every dollar of EBITDA created. Another example of the sources and uses of capital here, and to demonstrate that this non-cash charge should be adjusted for is, here is a simple pie of the uses of capital at CRA broken up into our three main buckets: talent, redistribution to our shareholders, and traditional CapEx.
The reason this demonstrates that you should make the adjustment for the forgivable loan amortization is that, as I told you, we use no debt in this period of time. So the cash that we used for these three buckets all has to be provided by cash from operations on that. For talent investments, here the majority of the capital for talent investments come for the acquisition of talent, and a much smaller share comes from what I would call talent maintenance. Sometimes when a contract is up for an individual, you need to re-up or maintain the talent or the revenue provided by that individual. Talent investments make up 46% of our total cash outlays here.
When the talent is available, I always want to put my money there and invest in the long-term viability of the organization. CapEx, we are not a very capital-intensive firm. The CapEx here is more for any kind of leasehold investments we have to make for computers, but it is roughly $4 million-$5 million of annual expenditures. I would expect that to be roughly the same in the years ahead. Then on the redistribution, as we talked about, roughly 3/4 is on the share repurchases and the $55 million is on dividend payments for period.
Let me end there. That dividend has been growing quite attractively, right around 15% since we originated it around eight, 10 years ago. I guess we're closer to 10 years now. I always have to check myself here. With that, the shareholder yield is also quite impressive and what I want to highlight there, and that's with the growing share price. We're returning, the yield is roughly 6% of our average market cap. With that, Joe, I guess I'm at the 15-minute mark. I will stop. Hopefully, some of the messages came across clearly.
A great presentation, Paul. Thank you for that. Let's turn to some questions. CRA has delivered record revenue performance through the first half of 2026, with broad-based growth across practices, and particularly strong momentum in management consulting in the international markets. What do you view as the most sustainable structural growth drivers that can support growth over the next three to five years?
As I sometimes joke with my colleagues at CRA, I love all my children. Each of these practices are part of the CRA portfolio. If the practice exists, they exist because we believe they have wonderful growth opportunities. We gathered as a Vice President group about two weeks ago, and we shared the contributions to growth. If you look at the big three, they're growing 9%, 10% a year. You look at all the other practices, they're growing 9%, 10% a year. Legal and regulatory, management consulting, the aggregate contributions are equal or balanced across the portfolio.
A special call-out to practices like our antitrust and competition economics practice, which I strongly believe is the world leader in providing these services. I think the future looks very bright for that practice. Our energy practice is enjoying a period of accelerated growth, with a large driver being all the AI investments. These data centers are creating huge decisions for the utilities as to where to add capacity, how to negotiate the rate deals with these providers.
We are working on behalf of the tech companies on where to place these data centers, how to negotiate the deals, and on behalf of the utilities that are trying to balance all these various needs. Our life sciences practice is enjoying a great surge. AI is also going to help with the development and the commercialization of the various drugs. What does CRA do? CRA helps these pharmaceutical companies in pricing the drugs and developing an optimal rollout strategy for the drug.
We see this as a demand amplifier. Last but not least, I will call out our forensic services practice. The cyber incident response services that we provide has been growing significantly. AI is wonderful to add efficiencies to our services, but AI has also created efficiencies for all these wrongdoers out there, making cyber attacks that much easier, and thus amplifying the need for CRA services.
Great. I think you pretty much answered this question, but I got one from the audience I will just run by you. They ask, "Can you provide examples of services provided to law firms on behalf of their clients?
Sure. On legal and regulatory, the law firms act as the intermediary for a number of reasons. One is to maintain confidentiality of these legal proceedings and the analysis that CRA is providing. Two, to not over intrude on the day-to-day lives of our ultimate clients on that. As an example, you would be hard-pressed to see a large merger being discussed in the press that CRA is not representing one of the parties, either the buyer, the acquired, or an intervener, or sometimes a government entity.
That is an example. You see a lot of press on intellectual property rights, specifically with the growth of AI. Who owns the rights? Is AI infringing on many of those rights? We will get involved on those legal proceedings. When there's disputes about value or potential market manipulations, CRA is retained by the law firms on behalf of the ultimate clients on helping them navigate those legal proceedings.
Thanks for that additional detail, Paul. Across consulting, the biggest differentiator remains the ability to attract and retain top talent. The company's return to consultant headcount growth while maintaining utilization in the high 70% range, how should investors think about the balance between hiring for growth, consultant utilization, and operating margins over time?
Right now, given the composition of our portfolio, I think CRA should be operating in the high- 70s utilization mark with it. That enables us to deliver the quality of services clients have come to expect from CRA and also to pursue the growth opportunities in the marketplace. So high 70s utilization on that. I think for the last couple of years, CRA has been going through some optimization efforts in our practices, basically shifting capacity from areas that aren't growing as rapidly to areas that are growing more rapidly.
You see net headcount growth being largely flat in the past couple of years. But if I'm looking at CRA's prospects in the medium to long-term, headcount growth has to be in the mid-single digits. That's what we're striving for, that's what we think the growth opportunities dictate. Expect CRA to be delivering headcount growth in the mid-single digits.
Okay. Let's dive a little bit deeper. I know you went pretty quick on the AI slide. Where has AI measurably reduced the hours required to complete an engagement? Under hourly billing, how much of that benefit accrues to CRA versus the client? Maybe a little deeper dive into how AI is impacting the business, either on the benefits or the challenges.
Sure. I need to come up with a better introduction to this answer, but CRA is really expensive, okay? We also provide tremendous value to our clients. When you are really expensive, you better be striving to always add value to clients. Technology regularly commoditizes lower-level services. AI is a revolutionary technology, but is not the first technology to commoditize lower-level services. For firms like CRA, the challenge is can you raise the level of quality and the services provided to your clients? What AI has enabled us to do is get to the higher value-added services more rapidly.
Right away, individuals are saying, "Doesn't that mean less revenue?" Not really. 80% of our work is in the legal regulatory space, and the constraint that we have is not the number of tasks being performed. It is really the time that you have to perform them. We are getting retained on very high-stakes litigation matters. Okay? If you could get through the preliminary stages of a matter more rapidly, you get to do your various what if analyses.
You get to more in-depthly scrutinize what the opposing side is putting forth on that. I think it increases our ability for the value added. We have not seen a reduction in hours to date, and I would highlight that many of our clients, the deepest client base is the technology sector. Individuals that know more about AI and its applications are the individuals retaining CRA. We have to shift our services to higher value added to that and look for the right opportunities to deploy AI in our everyday lives.
Thanks for that. As beginning to looking for planning into 2027, which offers the greatest opportunity for earnings growth? Additional consultants, higher productivity, better realized pricing, improved margins, and are you planning any changes to CRA's capital allocation strategy as you wrap up 2026 and look towards 2027?
Yeah. 2026 has been a fabulous year. Clearly, we're very pleased with the revenue growth that we've enjoyed to date. The other thing that I did not touch on during the presentation is we're also seeing inbound of new business opportunities at levels and at rates of growth that I have never seen before during my 37 years.
Our inbound, the growth rate of new business opportunities being presented to CRA significantly exceeds that of the revenue growth to date. We're really excited about that, and we have not seen any signs of that slowing to date for that. I will start with that. Our rate increases have stuck in 2026. We expect that the rate increases will be quite durable into 2027, and the contributors to growth in 2026, I don't see that subsiding as we enter 2027.
Great. Well, Paul, we've come to the end of our allotted time. We've covered a lot of ground today and got significant insight into what CRA International does, its markets, and opportunities. We appreciate you taking the time to participate in our conference, and we wish you and the company the best in the future. Thanks again.
Thank you, Joe. Thank you, everyone, for joining us.